Mark Zandi Calls for Payroll Tax Cut Extension to Avoid Recession

October 0700:002011

New York, October 7 (rainbownewsline.com) – Noted US economist Mark Zandi has warned on Thursday that if the payroll tax holiday is not extended into 2012, another recession would become unavoidable. Democrats have termed the extension as a top priority that needs immediate attention.

The present tax holiday is due to expire by the end of the year and as a result emergency unemployment benefits and other stimulus efforts could shave up to 1.7 percentage points from gross domestic product in 2012, as per Zandi, chief economist at Moody’s Analytics. He said at a congressional roundtable on tax incentives and the economy that “the economy is struggling to avoid another recession.”

Calling the situation “a dramatic reversal from the beginning of the year,” Zandi warned that without the tax holiday extension “We will be back in a recession.” The payroll tax, which funds the Social Security retirement system, was reduced to 4.2 percent under the tax holiday at the beginning of 2011. If the tax holiday is not extended, the rate will revert to 6.2 percent at the end of the year.

President Obama had sought to extend and expand the employee payroll tax holiday in his jobs package introduced last month. He had also proposed that the rate should be further lowered to 3.1 percent for 2012.